Two Pure-Play Companies Become Independent in Early 1999
WESTPORT, Conn., Dec. 8 /PRNewswire/ -- IMS HEALTH (NYSE: RX) today
released historical pro forma financial statements excluding its GartnerGroup
investment. On November 12, 1998, IMS HEALTH announced plans to spin-off its
equity ownership of GartnerGroup, Inc. (NYSE: IT) through a tax-free
distribution of GartnerGroup stock to IMS HEALTH shareholders. IMS HEALTH is
the world's leading provider of information solutions to the pharmaceutical
and healthcare industries.
"The spin-off of GartnerGroup equity to IMS HEALTH shareholders enables
both companies to focus on their unique industries, thus creating two 'pure
play' operating businesses," said Robert E. Weissman, IMS HEALTH chairman and
CEO. "We are on-track for an early 1999 completion of the transaction."
New Information about the Transaction
In order to achieve a tax-free spin-off, the transaction involves a
recapitalization of GartnerGroup, including creation of a new Class B Common
Stock, to be distributed to shareholders of IMS HEALTH. Such distribution
will disperse IMS HEALTH's control block among all of its public shareholders.
Approximately 40.7 million of the 47.6 million shares of GartnerGroup stock
owned by IMS HEALTH will be exchanged for GartnerGroup Class B stock and
distributed to IMS HEALTH shareholders. The Class B Common Stock will be
entitled to elect 80 percent of GartnerGroup's board of directors, but will
otherwise be substantially identical to existing Class A Common Stock.
GartnerGroup's board of directors plans to condition approval for the
recapitalization on a majority vote from the non-IMS shareholders. Under
Delaware law the recapitalization requires only a majority vote of all
GartnerGroup shareholders, including IMS HEALTH.
Separately, GartnerGroup announced on November 12, 1998 that, subject to
the IRS approval, it intends to declare a special one-time cash dividend of
$300 million, payable to all shareholders of record immediately prior to the
spin-off. Further, the GartnerGroup board of directors authorized a share
repurchase program of $300 million or 20 percent of GartnerGroup shares
outstanding, whichever is less, to begin after the spin-off. In order to
obtain a favorable IRS tax ruling, GartnerGroup may not acquire more than
20 percent of its outstanding stock subsequent to the spin-off. Because the
share repurchase must be limited, the GartnerGroup board of directors is
returning additional value directly to shareholders through the cash
distribution. The cash dividend, together with the share repurchase, are
intended to return substantial and tax-efficient value to GartnerGroup
shareholders.
"An enhanced benefit to IMS HEALTH shareholders is the low effective tax
rate on our share of the GartnerGroup $300 million cash dividend," said
J. Michal Conaway, chief financial officer. "We anticipate paying only a 7
percent tax on a substantial portion of the dividend, due to the U.S. Federal
Tax rate assessed against corporate dividend recipients. This will increase
the after-tax proceeds to be applied to the repurchase of IMS HEALTH stock,
thus returning incremental value to our shareholders."
In addition, a substantial portion of the GartnerGroup $300 million
dividend may not be taxable to its shareholders as ordinary income. Subject
to confirmation at the end of the GartnerGroup fiscal year 1999, a
substantial portion of the dividend may be treated for tax purposes as a
return of capital. The return of capital portion of the dividend would reduce
the shareholders' tax basis in GartnerGroup stock and be subject to tax only
upon disposition of such stock.
To satisfy IRS requirements, IMS HEALTH will monetize its remaining
6.9 million shares and warrants for an additional 600,000 shares. To
facilitate an orderly monetization, and not put undue pressure on the market
price of GartnerGroup stock, the GartnerGroup shares will not be sold within
90 days following the spin-off. This, coupled with the GartnerGroup share
repurchase, is intended to protect the value of GartnerGroup shares. IMS
HEALTH's after-tax proceeds from the GartnerGroup dividend and subsequent sale
of IMS HEALTH's remaining 6.9 million shares of GartnerGroup Class A stock and
warrants for GartnerGroup stock will be used to repurchase IMS HEALTH common
stock, expanding the previously announced IMS HEALTH share repurchase program.
These after-tax proceeds are expected to total in the range of
$200 -- 300 million.
A request has been filed with the Internal Revenue Service seeking a
ruling that the spin-off of GartnerGroup will be tax-free to IMS HEALTH and
its shareholders. Submissions to the Securities Exchange Commission and New
York Stock Exchange are in process.
The distribution of GartnerGroup shares to IMS HEALTH shareholders is
expected to be completed in the first half of 1999, subject to a favorable IRS
ruling, final approval of the IMS HEALTH and GartnerGroup boards of directors,
and approval by shareholders.
IMS HEALTH
IMS HEALTH is the world's leading provider of information solutions to the
pharmaceutical and healthcare industries. With more than $1 billion in 1997
revenue, IMS HEALTH operates in over 90 countries. IMS HEALTH is the largest
pharmaceutical manufacturer information partner, with over 40 years'
experience in the industry. Key products and services integral to customer
day-to-day operations include: market research for prescription and
over-the-counter pharmaceutical products; sales management information to
optimize sales force productivity; technology enabled selling solutions for
sales and marketing decision-making; and technology systems and information
services that support managed care organizations. Additional information is
available at http://www.imshealth.com
1999 IMS HEALTH Guidance
"We are on target to achieve the current First Call consensus estimate of
$1.61 for our 1998 EPS, including a contribution of $0.33 to $0.34 from our
47 percent interest in GartnerGroup," said Mr. Conaway. "On that basis, IMS
HEALTH's standalone 1998 EPS is projected in the range from $1.27 to $1.28.
Using those estimates as a base, we have confirmed our guidance for IMS
HEALTH's standalone 1999 EPS growth in the range of 21 to 24 percent."
GartnerGroup
As the world's leading independent authority on information technology
(IT), GartnerGroup provides clients with a wide range of products and services
in the areas of IT advisory services, measurement, research, decision support,
analysis and consulting. Founded in 1979, with headquarters in Stamford, CT,
GartnerGroup is at the center of a global community of more than 11,000 client
organizations served by analysts in 80 locations worldwide. GartnerGroup's
unique capabilities and resources help bring clarity to the direction of the
world's hottest and most volatile industry.
Investor Information Kit
Investor packages containing additional information, pro-forma financial
tables and an anticipated timeline are available in the Investor Information
section of the IMS HEALTH website at http://www.imshealth.com.
This press release includes statements which may constitute
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although IMS HEALTH
believes the expectations contained in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove
correct. This information may involve risks and uncertainties that could
cause actual results of IMS HEALTH to differ materially from the
forward-looking statements. Factors which could cause or contribute to such
differences include, but are not limited to (i) the risks associated with
operating on a global basis, including fluctuations in the value of foreign
currencies relative to the U.S. dollar, and the ability to successfully hedge
such risks, (ii) the extent in which IMS HEALTH seeks growth through
acquisitions, and the ability to identify and consummate acquisitions on
satisfactory terms, (iii) the ability to develop new or advanced technologies
and systems for its businesses on a cost-effective basis, (iv) the ability to
successfully achieve estimated effective tax rates and corporate overhead
levels, (v) deterioration in economic conditions, particularly in the
pharmaceutical, healthcare, information technology or other industries in
which IMS HEALTH's customers operate, (vi) regulatory and legislative
initiatives, particularly in the area of medical privacy, (vii) the market
price for GartnerGroup stock and (viii) the tax treatment of the GartnerGroup
dividend.
SCHEDULE I
IMS HEALTH
PRO FORMA INCOME FROM RECURRING OPERATIONS* -- EXCLUDING GARTNERGROUP
(unaudited, in millions except per share)
1996 RESULTS
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Full Yr
Revenue $208.5 $233.2 $234.4 $310.7 $986.8
Oper Income 18.0 32.7 49.1 87.1 186.9
Interest
Inc, Net .9 .6 3.2 1.5 6.2
Other Inc/
(Exp), Net 3.5 .1 (.9) 2.1 4.8
Pretax Income 22.4 33.4 51.4 90.7 197.9
Tax Provision (6.3) (9.3) (14.3) (25.4) (55.3)
NET INCOME $16.1 $24.1 $37.1 $65.3 $142.6
Basic EPS $.09 $.15 $.21 $.39 $.84
Diluted EPS $.09 $.15 $.21 $.39 $.84
Avg Shares
Outstanding (YTD)
Basic 169.7 169.8 169.9 169.9 169.9
Diluted 170.2 170.2 170.2 170.5 170.5
1997 RESULTS Full Yr
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Full Yr Growth
Revenue $229.3 $251.1 $251.1 $328.1 $1,059.6 7%
Constant-Dollar Growth 10%
Oper Income 21.6 39.4 59.2 107.4 227.6 22%
Interest
Inc, Net 3.2 1.5 3.1 2.7 10.5 68%
Other Inc/
(Exp), Net (.8) (1.3) (.3) (2.4) (4.8) --
Pretax Income 24.0 39.6 62.0 107.7 233.3 18%
Tax Provision (6.2) (10.6) (17.6) (29.5) (63.9) (16%)
NET INCOME $17.8 $29.0 $44.4 $78.2 $169.4 19%
Basic EPS $.10 $.18 $.27 $.48 $1.03 23%
Diluted EPS $.10 $.18 $.26 $.47 $1.01 20%
Avg Shares
Outstanding (YTD)
Basic 169.8 167.6 166.1 165.2 165.2
Diluted 170.0 167.9 167.7 167.5 167.5
* Recurring operations exclude results of Nielsen Media Research and
one-time charges and gains.
SCHEDULE II
IMS HEALTH
PRO FORMA INCOME FROM RECURRING OPERATIONS* -- EXCLUDING GARTNERGROUP
(unaudited, in millions except per share)
1997 RESULTS
Qtr 1 Qtr 2 Qtr 3 YTD
Revenue $229.3 $251.1 $251.1 $731.5
Oper Income 21.6 39.4 59.2 120.2
Interest Inc, Net 3.2 1.5 3.1 7.8
Other Inc/(Exp), Net (.8) (1.3) (.3) (2.4)
Pretax Income 24.0 39.6 62.0 125.6
Tax Provision (6.2) (10.6) (17.6) (34.4)
NET INCOME $17.8 $29.0 $44.4 $91.2
Basic EPS $.10 $.18 $.27 $.55
Diluted EPS $.10 $.18 $.26 $.54
Avg Shares
Outstanding (YTD)
Basic 169.8 167.6 166.1 166.1
Diluted 170.0 167.9 167.7 167.7
1998 RESULTS YTD
Qtr 1 Qtr 2 Qtr 3 YTD Growth
Revenue $241.0 $270.5 $283.6 $795.1 9%
Constant-Dollar Growth 13%
Oper Income 33.6 55.4 71.3 160.3 33%
Interest
Inc, Net 3.9 4.6 6.9 15.4 98%
Other Inc/
(Exp), Net (2.8) (2.5) (3.4) (8.7) (277%)
Pretax Income 34.7 57.5 74.8 167.0 33%
Tax Provision (9.5) (15.8) (20.5) (45.8) (33%)
NET INCOME $25.2 $41.7 $54.3 $121.2 33%
Basic EPS $.16 $.25 $.33 $.74 35%
Diluted EPS $.15 $.25 $.32 $.72 33%
Avg Shares
Outstanding (YTD)
Basic 162.4 162.8 163.2 163.2
Diluted 167.3 168.2 168.6 168.6
* Recurring operations exclude results of Nielsen Media Research and
one-time charges and gains.
SOURCE IMS HEALTH
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http://www.imshealth.com
Company News On-Call:
http://www.prnewswire.com/comp/115785.html or fax,
800-758-5804, ext. 115785
CONTACT:
Michael Gury of IMS HEALTH, 203-222-4230
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